Under the terms of the agreement, Tempur-Pedic will pay $2.20 a share or $242 million for Sealy, a 3% premium over the company’s Wednesday closing price of $2.14 a share. It will also take on about $750 million in Sealy debt, Reuters noted.
Investors liked the deal. Shares of Tempur-Pedic jumped more than 17% in Thursday morning trading, while Sealy shares rose more than 4%.
Once the merger is completed, Sealy and Temper-Pedic will be run separately. Sealy’s current CEO, Larry Rogers, will report directly to Tempur-Pedic CEO Mark Savary.
Bank of America will provide Tempur-Pedic with $1.77 billion to finance the acquisition, and the retirement of some debt.
It has been an eventful year for Sealy. H Partners, the company’s second largest shareholder, recently criticized Kohlberg Kravis Roberts (NYSE:KKR), which took Sealy private in 2004 for $1.5 billion, and which still holds a 44% stake in the company, of lowering company profits with hefty fees while burdening it with debt.